Thursday 28 Mar 2024
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TOKYO (March 31): The US dollar edged up on Friday, poised for weekly gains after solid US economic data contrasted with cooling euro zone inflation, though it was set to book losses in the first quarter amid concerns about the direction of US President Donald Trump's policies.

The dollar index, which tracks the US currency against a basket of six major rivals, was up 0.2% at 100.59, up 1% for the week and within a hair of a two-week high of 100.60 hit overnight. It was down 1.6% for the first quarter, and 0.5 for the month.

The euro nursed losses, flat on the day at US$1.0675 and down 1.1% for the week. It was up 0.9% for March, and 1.5% for the quarter.

German and Spanish consumer price data released on Thursday showed inflation slowed more sharply than expected in March as oil prices slumped, offering some respite to the European Central Bank as it faces pressure to wind down its monetary stimulus.

Revised US gross domestic product data on Thursday showed that US fourth quarter growth slowed less than previously reported as consumer spending provided a boost that was partially offset by the largest gain in imports in two years.

"The number itself wasn't great but the forward-looking indicators look pretty good," Jennifer Vail, head of fixed-income research for US Bank Wealth Management in Portland, Oregon said about the US figures.

"You're probably going to see some modest reaction to the softness we're seeing in the eurozone, as it looks like some of the inflation data is not as strong as initially thought," she said. "I think the reason you didn't see more substantial dollar strength is concerns on the lack of conviction that our new president had in getting ACA repealed."

Republicans withdrew their bill a week ago to replace and repeal the Obama administration's Affordable Care Act (ACA) due to lack of support in Congress, raising concerns that Trump's tax reform and stimulus measures might also face legislative challenges.

Trump lashed out on Thursday at Republican conservatives who helped torpedo the healthcare legislation, escalating a feud within his party.

TRUMP'S TRADE ORDERS IN FOCUS

Later on Friday, Trump will sign executive orders aimed at identifying abuses that are causing massive US trade deficits and clamping down on non-payment of anti-dumping and anti-subsidy duties on imports, according to his top trade officials.

Commerce Secretary Wilbur Ross told reporters that one of the orders directs his department and the US Trade Representative to conduct a major review of the causes of US trade deficits, including "currency misalignment.

While the foreign exchange market's reaction to the news was muted, market participants were warily watching for developments.

"From a risk-management perspective, it's definitely something on the radar," said Bart Wakabayashi, branch manager for State Street Bank and Trust in Tokyo.

As the conditions to be labelled a currency manipulator are subjective, US officials could tweak their definition so that it even included countries like South Korea and Japan, he said.

Against its Japanese counterpart, the US dollar added 0.1% to 112.07 yen, after edging up to its highest levels since March 21. It was up 0.6% for the week, but down 0.6% for the month and skidded 4.3% for the quarter.

Data released on Friday showed Japan's core consumer prices rose 0.2% in February from a year earlier, marking the fastest annual pace in nearly two years but still distant from the central bank's ambitious 2% target.

Japan's business year ends on Friday. The US dollar was on track to lose 0.4% against the yen for the fiscal period.

Sterling edged up 0.2% to US$1.2481, on track for a slight gain in a week marked by volatile trading as British Prime Minister Theresa May formally triggered the Brexit process.

It was up 1.2% for the quarter, on track for its first quarterly gain against the US dollar for almost two years as accelerating inflation fuelled expectations that the Bank of England was moving towards tightening policy.

The US dollar rallied 1.3% against South Africa's rand to 13.470, its highest since early February, after President Jacob Zuma sacked finance minister Pravin Gordhan in a cabinet reshuffle following days of speculation that has rocked the country's markets and currency.

Gordhan was replaced with home affairs head Malusi Gigaba.

 

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